0% purchase credit-card deals are becoming less generous

People looking to put large purchases on to interest-free credit cards are struggling to find deals as good as those available a couple of years ago.

There are still some good deals available, but overall the purchase terms on these interest-free cards have sunk to a two-year low. The likes of Virgin Money, Santander and Post Office Money have all slashed the interest-free periods on their cards recently.

The average interest-free period for purchases has fallen by an average of 21 days over the past year, according to the analysts at Moneyfacts. But this figure masks some more dramatic changes, with some cards seeing up to 20 months taken off their interest-free periods.

“The cuts to 0% purchase terms are likely set to continue, but the severity does depend on how long the market-leaders are able to sustain their offers,” said Rachel Springall, of Moneyfacts, who added there was often a knock-on effect across the sector.

“As we have seen countless times, any significant card withdrawals or reductions can create a domino effect if their counterparts are inundated with applicants.”

The best deals available at the moment are 0% purchase cards that come with 28-month interest-free terms, but there are only three providers offering those. Post Office Money had been a fourth provider offering that deal but it has now slashed its introductory period to just eight months.

These cards are popular with people who want to make a large purchase and spread the cost over a reasonably lengthy period without paying interest on that borrowing, potentially saving hundreds of pounds – and all the while benefiting from the extra consumer protection that comes from using a credit card. But they can be handy for smaller purchases, too.

“During a period of economic uncertainty, borrowers may well turn to 0% introductory purchase credit cards not just for high-cost goods but also as a way to cover any financial emergencies,” said Ms Springall.

“The fact that the length of the average interest-free period has fallen to a two-year low will therefore be hugely disappointing.”